The U.S. informed Arab governments Tuesday that it will
support a U.N. Security Council
statement reaffirming that the 15-nation body �does not accept the
legitimacy of continued Israeli settlement activity,� a move aimed at avoiding
the prospect of having to veto a stronger Palestinian resolution calling the
settlements illegal.

But the Palestinians rejected the American offer following a
meeting late Wednesday of Arab representatives and said it is planning to press
for a vote on its resolution on Friday, according to officials familiar with the
issue. The decision to reject the American offer raised the prospect that the
Obama administration will cast its first ever veto in the U.N. Security Council.

Still, the U.S. offer signaled a renewed willingness to seek
a way out of the current impasse, even if it requires breaking with Israel and
joining others in the council in sending a strong message to its key ally to
stop its construction of new settlements. U.S. officials were not available for
comment, but two Security Council diplomats confirmed the proposal.

The Palestinian delegation, along with Lebanon, the Security
Council�s only Arab member state, asked the council�s president late Wednesday
to schedule a meeting for Friday. But it remained unclear whether the
Palestinian move today to reject the U.S. offer is simply a negotiating tactic
aimed at extracting a better deal from Washington.

Susan E. Rice, the U.S. ambassador to the United Nations,
outlined the new U.S. offer in a closed door meeting on Tuesday with the Arab
Group, a bloc of Arab countries from North Africa and the Middle East. In
exchange for scuttling the Palestinian resolution, the United States would
support the council statement, consider supporting a U.N. Security Council visit
to the Middle East, the first since 1979, and commit to supporting strong
language criticizing Israel�s settlement policies in a future statement by the
Middle East Quartet.

The U.S.-backed draft statement -- which was first reported
by Al Hurra -- was obtained by Turtle Bay. In it, the Security
Council �expresses its strong opposition to any unilateral actions by any party,
which cannot prejudge the outcome of negotiations and will not be recognized by
the international community, and reaffirms that it does not accept the
legitimacy of continued Israeli settlement activity, which is a serious obstacle
to the peace process.� The statement also condemns �all forms of violence,
including rocket fire from Gaza, and stresses the need for calm and security for
both peoples.�

U.S. officials argue that the only way to resolve the Middle
East conflict is through direct negotiations involving Israel and the
Palestinians. For weeks, the Obama administration has refused to negotiate with
the Palestinians on a resolution condemning the settlements as illegal,
signaling that they would likely veto it if it were put to a vote. The
Palestinians were planning to put the resolution to a vote later this week. But
Security Council statements of the sort currently under consideration are voted
on the bases of consensus in the 15-nation council.

The United States has, however, been isolated in the
15-nation council. Virtually all 14 other member states are prepared to support
the Palestinian resolution, according to council diplomats. A U.N. Security
Council resolution generally carries greater political and legal force than a
statement from the council�s president.

The U.S. concession comes as the Middle East is facing a
massive wave of popular demonstrations that have brought down the leaders of
Tunisia and Egypt and are posing a challenge to governments in Algeria, Bahrain,
and Iran. �